21 November 2020

BUSA’s RESPONSE TO RATINGS DOWNGRADES ANNOUNCED ON 20th NOVEMBER BY MOODY’S AND FITCH

BUSA hopes that the latest sovereign ratings downgrades galvanise the country into taking urgent action to get onto the road to address the reasons raised by Moody’s and Fitch for the downgrades. The Moody’s downgrade places SA two notches into junk status, while the Fitch downgrade places the country three notches below junk status. This reinforces the severe socio-economic crisis confronting the country and should impress on all stakeholders the urgency with which clear hard decisions need to be taken, short-term deliverables need to be implemented and credible and properly resourced plans for longer term interventions need to be tabled.

 

BUSA also notes the response by National Treasury (NT) to the downgrades. We note further that NT has been consistent in its analysis of the economic and fiscal crisis. We have consistently supported this analysis and urged urgent action. We also agree with the description by NT of the dire consequences to our cost of borrowing and resultant worsening of our fiscal deficit.

 

Business stands ready to work with government and other social partners to cooperate in efforts to address the issues raised by NT and the rating agencies. These include the weakening of our fiscal strength over the medium-term, implementation risk related to structural reform, rising government debt, low growth trend and our track record on implementation. In particular we must address our country’s low levels of productivity, exercise wage restraint, improve the ease of doing business and our competitiveness and deal with the ongoing challenge of financially weak State-Owned Companies that are not fit for purpose. In all of these areas business stands ready to support the necessary actions.

 

However, we firmly believe we do not have to continue discussions on what needs to be done. Social partners, including government, have identified immediately implementable areas. These fall primarily in the ambit of government to implement and business has offered capacity to assist wherever the situation requires. Business is also committed to invest if long standing and repeatedly identified structural economic reforms are put in place.

We remain convinced that urgent engagements are necessary on how to address the structural reforms and the fiscal crisis. Social partners must urgently engage to agree where possible and, after such consultations, government must prioritise between options, take the difficult decisions and implement.

 

This is not a time to cast blame but, instead, to come together and act urgently! But the principal levers do lie with government and those we have mandated to govern must now lead decisively!

Cas Coovadia

 

CEO: Business Unity South Africa